New Government Credit Card Act
The CARD Act was signed by President Obama. The supposed aim of this potentially fatal act is to put an end to "so-called" unfair rate hikes and hidden fees. However; at a time when our economy is in desperate need of credit, democrats are putting a restrictive squeeze on the credit industry's ability to offer easy approval loans and credit cards to all consumers, including bad credit people who need credit now the most.
Review our article:
Government Credit Card Control Dooms Rewards
It is estimated that 80% of consumers have credit cards, with over 40% of them carrying a balance. This clearly shows how deeply Americans rely upon revolving credit for emergency expenses between pay checks.
Now, the Federal Reserve has taken steps to squash free-lending by putting an end to what they deem as inadequate disclosures and unfair practices. How much more mumbo jumbo do we really need?
There seems to be four areas targeted by democrats in the credit card reform. They claim these measures are to protect consumers, to make credit card statements and disclosures simpler (because the government thinks the average person is stupid), and to punish those companies whom the government feels is engaging in deceptive practices (so the congressman/senator can get re-elected for looking like a hero).
But, what will be the most likely result? Less credit for everyone, higher rates for everyone and; perhaps, absolutely no credit for bad credit people.
President Obama's ill-fated Law claims it will ban unfair rate increases, prevent unfair fee traps, and outline plain language disclosures and accountability. The House Financial Services Committee and the Senate Banking Committee; both overwhelmingly democrat, pushed for this legislation. Hence, when you find it even more difficult to obtain credit; or have to pay outrageously high rates on new credit, you'll know where to point the finger of blame.
Because of the new law, interest rates on existing balances cannot be increased by credit card companies for "any reason" or for "universal default", and restricts retroactive rate increases due to late payments. This is a dangerous piece of legislation... if a credit card company cannot increase interest rates on a cardholder who has become a bad credit, high risk threat of default, such company will likely discontinue offering credit; or decent interest rates, to new applicants who may even vaguely represent a potential threat of default... including people with only 'some' credit problems.
The new law does allow for promotional rates with new accounts, but those rates must extend for at least 6 months. You can bet credit card companies will not offer promotional rates to anyone with less than good credit, since the promo rate must extend for at least 6 months and cannot be raised if the customer proves later to have credit issues.
The new law also requires credit card companies to give card holders at least 21 calendar days from time of mailing to pay. Companies can no longer charge fees for weekend deadlines, and must apply excess payments to the highest interest balance first.
The new law makes it difficult for cardholders to charge beyond their credit limit, because they must first give their lender permission. Only then can the cardholder charge beyond their limit, at which time the card company may then charge an over-limit fee.
There are restraints on fees for subprime and low-limit credit cards. Regarding Gift and Stored Value Cards there are restrictions for inactivity fees unless the card has been inactive for at least 12 months.
Creditors must give consumers clear disclosures of the terms before they open an account. They must also provide clear statements of the activity on the accounts afterwards. Issuers must display information on statements about how long it would take to pay off the existing balance and the total interest cost only the minimum due is paid. They also have to display the payment amount and the total interest cost to pay off the existing balance in 36 months.
With all this added-work now required of credit card companies (and the additional paperwork they are required to provide), who do you think will pay for these extra costs? If you guessed the cardholder, you guessed right. Although the new law prohibits credit card companies from adjusting interest rates on existing accounts of people who's credit scores drop, this means the card companies will have to automatically charge much higher interest rates from the get-go on all new accounts.
Very soon, people will miss the 'good-ol days' of easy credit, the days back before democrats burdened the credit industry with rules that prevented poor credit people from getting credit and forced card companies to charge everyone sky-high rates to offset losses caused only by a minority of bad credit people.
Government regulations have already destroyed the auto industry... also it was government regulations that required banks to extend mortgage loans to high risk people. Call your congressman and senator and tell them you support a free-trade nation that allows companies to compete against each other (instead of against consumers), to offer the best deals. Tell your congressman/senator to keep the government out of the credit industry.
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